The government says goods and services tax is payable on the invoice value plus tax collected at source under income tax and not just on the value of the goods
New Delhi: Customers will have to shell out more for cars priced above Rs 10 lakh after the latest directive from the Central Board of Indirect Taxes and Customs (CBIC). The government has said goods and services tax (GST) is levied on the invoice value plus tax collected at source (TCS) under income tax and not just on the value of the goods, says an Economic Times report.
The financial daily mentioned that the clarification, however, suggests that consumers will have to pay GST on the value of tax collected by an auto dealer. Apart from automobiles, the latest guidelines will also hit the telecom tower industry that faces GST and TCS levies on the sale of scrap, besides the minerals and coal sectors.
At present, TCS is applicable on motor vehicles priced higher than Rs 10 lakh at the rate of 1 per cent and is levied on the ex-showroom price, including applicable GST.
“It is clarified that… taxable value for the purposes of GST shall include the TCS amount collected under the provisions of the Income Tax Act since the value to be paid to the supplier by the buyer is inclusive of the said TCS,” according to ET which cited the CBIC circular.
The publication quoted unidentified experts as saying that this clarification is going to adversely affect the industry, especially the auto sector, as it will have a direct incremental impact on the price of goods to end-customers. They are of the view that TCS is primarily not a consideration for the goods sold but is simply the collection of income tax on behalf of the buyer, thus the applicability of GST appears to be wrong.
Pratik Jain, partner and national indirect taxes leader, PwC, told ET: “Typically, the practice of industry has been to exclude TCS while computing GST. If GST is required to be paid on TCS, then it will lead to additional burden on consumers and will also result to circular reference in computation as TCS is to be computed on GST as well.”
